Get the latest updates on Vale SA for free!
Subscribe to receive a daily digest email, myFT Daily Digest, summarizing the latest news on Vale SA every morning.
In a significant move, Saudi Arabia has entered the global mining industry by becoming a minority shareholder in Vale’s base metals division valued at $26 billion.
On Thursday evening, the Brazilian company confirmed two separate agreements to sell a combined 13% stake in its base metals operations for a total of $3.4 billion in cash.
The division will be jointly owned by the Saudi Arabian Mining Company, the country’s Public Investment Fund, and Investment firm Engine No. 1, with ownership percentages of 10% and 3%, respectively.
Over the next decade, Vale plans to invest up to $30 billion in new projects across Brazil, Canada, and Indonesia to expand copper and nickel production, driven by the increasing demand for these metals in the electric vehicle industry.
“The base metals division will now have its own identity,” said Vale CEO Eduardo Bartolomeo. He added that the division may consider an IPO or merger in the future, but for now, the focus is on growth and execution.
This investment from Saudi Arabia aligns with the country’s efforts to diversify its economy and transition away from oil. It is part of a larger strategy that includes investments in renewable energy sources and the development of a battery supply chain.
Manara Minerals, the Saudi joint venture established in January, described this move as their first major investment in the global mining sector.
Vale, a major player in the mining industry with a market capitalization of $67 billion, relies on iron ore for about 80% of its revenues.
Bartolomeo has previously expressed his belief that the base metals division could eventually surpass the parent company and go public. In a recent interview with the Financial Times, he mentioned discussions with potential partners, which include automakers and pension funds.
Vale stated that the deal values its base metals division at $26 billion. The transaction is expected to be completed in early 2024, subject to regulatory approval and other conditions.
Based on calculations from RBC, the deal price represents an enterprise value of 9.3 times the division’s estimated 2023 earnings before interest, tax, depreciation, and amortization.
Chris James, founder of Engine No. 1, emphasized the division’s potential to responsibly supply the raw materials necessary for building the infrastructure of the future.
Furthermore, Vale reported a nearly 80% decline in second-quarter profits compared to the previous year, primarily due to lower iron ore prices, resulting in a net income of $892 million, significantly below analyst expectations.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
